Why is Ethereum 2.0 important?

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Why is Ethereum 2.0 important?

Ethereum 2.0 is a long-awaited upgrade to the Ethereum (ETH) network that promises significant improvements to the entire network’s functionality and experience. Some of the more notable upgrades include a shift to Proof of Stake (PoS), a shard chain, and a new blockchain at its core known as the beacon chain. All of this and more is expected to be done step by step through a carefully planned route.

Why is Ethereum 2.0 important?
Why is Ethereum 2.0 important?

But that’s just the tip. With Ethereum being one of the most popular cryptocurrencies on the planet, there are important details about what Ethereum 2.0 really is and how it will affect crypto as a whole.


Since the release of Ethereum, the development of new technologies in the form of decentralized applications (Dapps) and other blockchains has expanded greatly. Besides, many of these technologies have been built on top of the Ethereum network. Think of some of Decentralized Finance (DeFi)’s biggest innovations – a significant portion of which is running on Ethereum.

Unfortunately, scalability issues started to appear. As the number of transactions increases on the Ethereum network, the cost of performing these transactions (paid in Gas) also increases. If Ethereum is supposed to be the platform that opens up the next generation of the Internet, then economics must make sense. Otherwise, it will become impractical to use.

That’s where Ethereum 2.0 comes in. The proposed ETH 2.0 upgrades for the Ethereum network are said to primarily address the scalability issue. These enhancements will create a contrast to the existing version of Ethereum, all of which will be implemented according to a carefully planned roadmap.

What is Ethereum 2.0?

Ethereum 2.0 (aka Eth2 or “Serenity”) is a long-awaited upgrade to the Ethereum network that promises, among other things, to improve the network’s scalability. Through the implementation of several enhancements, speed, efficiency, and scalability will improve without sacrificing security and decentralization.

This version of Ethereum was always in the future, but it took a few years to launch. The main reason for this is that scaling the blockchain in a secure and decentralized way is a challenging task.

Thankfully, Ethereum 2.0 aims to solve this problem through the implementation of some very important features. These new features create some key differences between the Ethereum we know and the Ethereum we should expect.

Ethereum and Ethereum 2.0, what’s the difference?

The biggest difference between Ethereum and Ethereum 2.0 concerns the use of the Proof of Stake (PoS) consensus mechanism, the shard chain, and the signaling chain. Let’s find out these differences.

Proof of stake

Proof of Work (PoW) is Ethereum (and many other blockchains) way of keeping the network secure and up to date by rewarding miners who train and validate blocks on the blockchain. Unfortunately, PoW is not scalable because it requires increasing amounts of computing power as the blockchain grows.

Proof of Stake (PoS) solves this problem by replacing computing power with “in-game skins”. That means, as long as you have a minimum of 32 ETH, you can commit (i.e. stake), become a validator, and get paid by confirming transactions. If you want to dig deeper into how PoS and staking work, check out Proof of Stake Explained.


If you want to access the Ethereum network, you have to do this through a node. A node stores a copy of the entire network, which means that the node has to download, compute, store, and process every transaction since Ethereum began to exist. While you as a user don’t necessarily run a node just to transact, this slows things down.

Fractional chains are like any other blockchain, except they contain only specific subsets of the entire blockchain. This helps nodes by only having to manage a part, or shard, of the Ethereum network. This will increase the transaction throughput and overall capacity of Ethereum.

The beacons chain

With shard chains operating in parallel, something must ensure that they are all in sync with each other. Well, beacon chains solve that problem by providing consensus to all shard chains running in parallel.

The beacon chain is a brand new blockchain that plays a central role in Ethereum 2.0. Without it, information sharing between shards would not be possible and scalability would not exist. For this reason, it has been stated that it will be the first feature to be ported to Ethereum 2.0.

The Road to Ethereum 2.0

The implementation of Ethereum 2.0 will not be at the same time. Instead, it will be released in three phases, each of which comes with distinct features to ensure the success of the new Ethereum.

Phase 0: Ethereum 2.0

The first stage, or stage 0, will be dedicated to the release of the signaling chain as it is central to the functionality of the shard chain. There is no shard chain yet, but the beacon chain will begin accepting validators (i.e. creators) via a one-way deposit contract.

It’s important to note that all registered validators staking their ETH will not be able to “cancel” until the shard chains are fully implemented. That means ETH from validators will be locked until the next period.

The Eth2 deposit contract has reached the required minimum of 524,288 ETH to launch. Phase 0 begins on December 1, 2020.

Phase 1 / 1.5

The next phase is essentially a blend of two phases: phase 1 and stage 1.5. Phase 1 will introduce shard chains, which will allow validators to generate blocks on the blockchain via PoS. Phase 1.5 is when the Ethereum mainnet will officially introduce shard chains and begin the transition from PoW to PoS.

Phase 1 / 1.5 is expected to be implemented in 2021.

Phase 2

The final phase will be phase 2, which is when Ethereum 2.0 will support fully formed shards and become the full-fledged Ethereum network. The shard chain will also be able to work with smart contracts, allowing developers of Dapps and other technologies to seamlessly integrate with Ethereum 2.0.

Phase 2 is expected to be rolled out in 2021 or later.

Closing thoughts

Ethereum 2.0 is an important upgrade to the Ethereum network for a number of reasons, especially when it comes to scalability. Without the new features of PoS, sharding and signaling chains, Ethereum could eventually become unsustainable and cease to be the leading smart contract platform in the crypto ecosystem.

Eth2 implementation will take some time and possibly even longer than expected. The good news is that it was well underway and the Ethereum developers dedicated to witnessing it.

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